Minimise Risk of Mortgage Application Rejection
With the stamp duty holiday likely to lead to more mortgage applications, it is important prospective buyers are aware of the risks involved with applying for a mortgage. Buying a home is a major commitment, and a mortgage represents a significant outlay.
Lenders are keen to feel as confident as possible about offering a mortgage, and this means applicants are scrutinised closely. This is especially the case in the modern environment with the COVID-19 pandemic impacting on the mortgage market.
Due to demand for other products, and staffing issues, many lenders have reduced the mortgage products on offer. Even though the number of mortgage products on the market is improving as we move forward, availability is less than it was before.
Many mortgage applicants have suffered rejection this year
Also, research from Butterfield Mortgages suggests 50% of property buyers have been denied a mortgage this year. This includes applicants who receive a mortgage offer in principle, only to find they fell at the final hurdle.
Applying for a mortgage is often a challenging process, with a number of steps required to eventually secure the loan. For those who are applying for a mortgage, it is usually the case that a large amount of documentation is required to process this. A detailed record of income and outgoings are required, as well as details of other earnings such as investments or benefits.
Michelle Stevens is a Mortgage Specialist at finder.com, and she spoke to the Daily Express to talk about why some applicants might find their mortgage application is rejected.
Ms Stevens said: “A mortgage is a huge financial commitment for both the lender and the borrower, so there are always stringent checks in place and therefore always the potential risk of being rejected. To avoid this scenario, applicants should make sure they have all the financial documents ready for their application – including any bank statements, payslips or proof of income.”
Applicants must consider their application carefully
Ms Stevens spoke about the importance of creating a budget for the mortgage application, saying; “Perhaps an overlooked but basic thing for budding homeowners to do is check how big a mortgage they will qualify for on their income. This is so they are not over-reaching in terms of affordability and applying for an amount they might get rejected for. There are mortgage calculators readily available online that will give you a rough guide on how much you can borrow before you start shopping around for a dream home.”
The Money Advice Service has provided a list of reasons why mortgage applications are rejected. The list includes:
- Issues surrounding an applicant’s credit – including a poor credit history or too many credit applications
- Current loans impact on a lenders’ chance to get an attractive mortgage
- Debt is another barrier to obtaining a suitable mortgage
While there are new challenges to overcome in the housing market, people shouldn’t consider arranging a mortgage to be an impossible task. However, it is vital people accept help and assistance from professionals in the field. If you are keen to arrange a mortgage, speak to a mortgage broker or experienced adviser and make sure you are fully equipped to make an informed decision.